CORRECTED-DEALTALK-Blackstone heading to Texas to firm up Dell strategy

(Corrects paragraph 12 to make clear Michael Capellas is no
longer chairman or CEO of VCE)

By Nadia Damouni and Poornima Gupta

NEW YORK/SAN FRANCISCO, April 4 Blackstone Group
will visit Dell Inc's headquarters on Monday to begin
an in-depth analysis of the company, sources said, a strong sign
the buyout firm is proceeding with an offer that could upset
founder Michael Dell's $24.4 billion buyout bid.

Blackstone and billionaire investor Carl Icahn
separately made preliminary proposals in late March that, if
finalized, could be superior to the offer on the table from
Michael Dell and private equity firm Silver Lake Partners LP.

The outcome of the auction would determine the future of
Dell as well as Chief Executive Michael Dell, who founded the
company in a dorm room in 1984 and turned it into the world's
No.3 personal computer maker.

In its first step toward firming up a bid, Blackstone is
working closely with Michael Dell in putting together a new
business plan and actively talking to him about staying on in
his current role as CEO, two people familiar with the matter
said.

If Michael Dell gets on board with Blackstone's
still-developing strategy for Dell, he would be Blackstone's
preferred choice running the new company, the sources said. But
the buyout firm also is putting an alternative executive plan in
place.

Blackstone has hired an executive consulting firm that has
reached out to about half a dozen high profile industry
executives to help evaluate Dell's businesses and provide advice
around strategy, the sources said.

The New York-based private equity firm and its consultant
are also talking to a few of the executives for potentially
running Dell, while some others are being considered for board
positions, the sources said.

The executives that have been contacted by the executive
reference firm include Cisco Systems Inc director
Michael Capellas, former IBM Corp services head Michael
Daniels, Oracle Corp President Mark Hurd and
Hewlett-Packard Co's PC boss Todd Bradley, the sources
said.

Hurd, who sources previously have said was being pursued for
a CEO job, has said he is happy at Oracle. Representatives for
Capellas and Daniels did not return calls seeking comment.
Bradley said in an email he was not contacted for a CEO
position.

The leading external candidate for the Dell CEO job is
Capellas, who has been in extensive discussions with Blackstone
in recent weeks brainstorming on strategy for Dell and
evaluating the industry, the sources said.

Capellas, best known as CEO and Chairman of PC maker Compaq,
that he sold to Hewlett-Packard in 2002 for $25 billion, has
been spotted entering and leaving Blackstone's Park Avenue
headquarters several times over the past few weeks.

In recent years, Capellas served as Chairman and CEO of VCE,
a collaboration between EMC Corp, Cisco and VMware Inc
. He no longer holds those posts.

"No one knows who will ultimately sign on yet," one of the
sources said. "(Blackstone) is exploring options with those
people."

Executives from the private equity firm and its consultants
will head to the Round Rock, Texas, Dell's headquarters on
Monday, to kick off the due diligence that is expected to last
about four weeks, people close to the matter said.

"What Blackstone is trying to do is develop a smarter
structure that provides more options than what Michael Dell and
Silver Lake seem to be doing," another said, adding that the
firm is trying to figure out a different way for Dell going
forward.

All the sources asked not to be named because the
discussions are confidential. Spokesmen for Blackstone and
Silver Lake declined to comment. A spokesman for Michael Dell
was not available for comment.

STRATEGY FOR DELL

Blackstone's team leaders for the bid include Dell's former
head of strategy, Dave Johnson, currently a senior managing
director at Blackstone. In the past, Johnson and Michael Dell
have not seen eye-to-eye over a strategy that would take Dell
forward, the sources said.

Johnson is working with Chinh Chu, one of Blackstone's most
experienced partners, who has been carrying out transactions for
the firm since 1990.

Michael Dell and Silver Lake envision Dell as an integrated
company, with the No. 3 PC-maker continuing to focus on a
diverse offering that includes enterprise software, servers, PCs
and financial services.

Johnson's strategy, if Blackstone acquires Dell, would be to
focus the company on enterprise software and accelerate the
effort to bring together all the acquisitions made in this
space, a source close to Johnson said.

In addition, under Johnson's plan, the company would exit
its finance business, the source said, adding that Johnson also
wants to make the company less Texas-centric and more global to
attract more talented employees.

During Johnson's three years at Dell, he oversaw an
aggressive acquisition strategy with some 18 to 20 deals,
including the 2009 purchase of Perot Systems Corp, which
catapulted Dell into the technology services market alongside
IBM and HP.

But one of the sources cautioned that the due diligence
process is still in the early stages, and that Blackstone is
just starting to put together a business plan.
(Reporting By Nadia Damouni in New York and Poornima Gupta in
San Francisco; Editing by Soyoung Kim, Edwin Chan and Tim
Dobbyn)

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